Flash boy Binck ignores law of holes
Somehow Binck reminds me of Van der Moolen in their last months. A listed company and a board which seems to have lost touch with reality. That’s nice when writing a kind of financial blog. Expected a quiet December, but voila : Binck. Time to get the popcorn.
SOR functioning poorly
Contender DeGiro showed credible evidence the Smart Order Router (SOR) of TOM doesn’t function properly. Binck is partly owner of TOM and sends all customer stock orders to this SOR, so kind of a big deal here.
Similar to Flash Boys, the book by Michael Lewis, the customer’s stock orders are routed to several exchanges (Chi-X, TOM, Euronext). But as some exchanges are being reached earlier than others, there’s a window of opportunity for HFT traders to take advantage of the order. (Research paper in English: pdf)
Even professor Menkveld, a very cautious scientist specialized in securities trading, made a relatively straight conclusion “there really seems to be a problem here” with these order executions. Of course, too early to draw final conclusions (maybe it isn’t TOM’s mistake but Euronext is to blame, for example) and more research is required etc.
Hilarious press release
That was last week. Back to the present. Binck released a hilarious press release. They don’t contest the evidence, but still demand rectification from DeGiro. Trying to get the attention away from the ball : the facts presented by DeGiro. In addition Binck claims DeGiro has been manipulating Binck’s own share price. Because the fall in the stock “can’t be explained by other factors” than the news from DeGiro. How sweet.
Remember the pointless lawsuits from Euronext against TOM? Suddenly TOM looks like a fat old fashioned institution, used to a monopoly and unable to compete against a new contender.
Reaction from DeGiro
Reaction from Gijs Nagel, head of DeGiro. Nothing to correct here, the evidence is clear. Here’s the Word document with the official reaction. It’s in Dutch, English version will follow tomorrow (update : here). A simple demands for Binck from DeGiro:
Has a HFT trader taken advantage in 11 of the 12 stock orders, by lifting/hitting orders in front of the customer? Yes or No?
Any other reaction would be a distraction from the real discussion. What a great position, when you can ask such a simple question. Binck is maneuvering itself in an impossible position. I’m pretty confident Binck will try to duck the question, denying the flash trades is very tricky given the evidence. This is a text book case of ignoring the first law of holes. If you find yourself in a hole, stop digging.
first
who cares, next
i am shocked by the amateurishness of both Binck and deGiro. Both of them have no clue what they are talking about. Obviously all people with proper financial market experience have left Binck, and deGiro’s wording shows they are old school guys who lost touch with current market structure. Their conclusion is correct though. Binck’s SOR is crap for institutional sized orders.
I just don’t understand why there isn’t a proper PR spokesman at Binck, trying to save their image. They seem to enjoy losing their reputation.
Their press release is terrible, any sane spokesman or legal advisor would have blocked such kind of release. Making a lot of noise, without substantial arguments.
DeGiro tries to reach maximum effect with keeping things simple, and feeding the public with paranoia flash trading suggestions. I think they are smarter than they appear.
there’s a difference between binck the broker and vdm da trader, duh?
as for the simple question, there’s a simple answer, only the exchange could confirm the two counterparties in a trade, any other third party wouldn’t be privileged to that information?
dutch are all old school, don’t expect big boy professionalism from them, certainly not from those who don’t even have global presence from where they could import some best practices?
It would be very simple for DeGiro’s parent, Hiq, to have written a piece of code and executed a trading strategy so that THEY would have been doing the flash trades. If you what kind of large test orders you are going to send in illiquid stocks that you know will move the market … just sayin’.
Yeah, but they executed the trades together with journalists from FD.
And the journalist from FD was privy to the trading information of Hiq? You don’t get it do you? Hiq could be running their algo from the room adjacent to the one where the journalist was sitting (this algo would be triggered by Hiq – the flash trader – being filled as the first SELLER against the TOM buy). Don’t you think DeGiro picked the stocks and approximate sizes and the intent of their test (namely: market moving trades in illiquid stocks) before the journalist even set foot in the building? I mean, what kind of journalist would propose test trades in Solvay? Come on! For DeGiro to dispel the possibility that they colluded with Hiq to ensure that the Smart Order Router would be disadvantaged, they would have to divulge Hiq’s trading activity, which is something they wouldn’t want to do. (Not that it matters, seeing how their fund loses money.)
hmm looks like someone’s being paid by Binck here
If DeGiro’s report is rigged (which I don’t believe), Binck would have no problem at all showing their SOR works like charm.
But instead, they head to court for.. what?
Jack, did we read the same interview with Professor Menkveld?
http://fd.nl/economie-politiek/1084403/flitshandel-we-moeten-waken-voor-lewis-achtige-taferelen
“Het is te kort door de bocht om TOM de schuld te geven. Er zijn andere verklaringen mogelijk … Ik maak me hier niet direct zorgen over. In de trades die DeGiro heeft gedaan is de grootste schade, op een order van ongeveer twee ton slechts €35.”
Why the 180 degree turn from bashing DeGiro to sucking up to them?
http://www.amsterdamtrader.com/2014/10/9-things-i-hate-about-degiro.html
http://www.amsterdamtrader.com/2014/11/degiro-lowers-fees.html
“DeGiro, always keen to capture free publicity with empty promises … DeGiro seems to have lost touch with reality … At DeGiro you can’t rely on a set of rules … Sometimes DeGiro takes action, subscribes to the claim, sells the shares and takes half of the profit. “
Menkveld says it may not be TOM’s mistake. Fair enough. Still HFT take advantage, yes or no?
“Of course, too early to draw final conclusions (maybe it isn’t TOM’s mistake but Euronext is to blame, for example) and more research is required etc”
No one said the report is rigged. But it is/would have been easy to rig the test.
And by the way, it’s not Binck’s SOR. The SOR is operated by TOM.
If Binck is to blame at all, it is for their choice to make use of TOM and its execution services (including TOM’s SOR). The same applies to ABN AMRO, for example, who have also abandoned Euronext in favour of TOM.
But truthfully, ANY intermediary who has ever routed an order to TOM could and should then be charged with neglecting the client’s best interests, because – according to Degiro – once you use TOM, TOM will use their SOR whether you like it or not and so you risk falling prey to flash traders.
Plain and simple: Degiro have a beef with the SOR. That is an issue with TOM rather than Binck. Binck is a competitor of Degiro, TOM is not. Not difficult to understand why Degiro doesn’t want to understand who bears responsibility for the SOR.
Well for one, Binck is a shareholder in Tom, so obviously has a direct influence on functionality.
two, Binck states the SOR as one of their major advantages over Degiro, so Degiro is simply proving Binck’s statements wrong rather than blaming Binck
We agree that they don’t appear smart.
you don’t seriously believe Binck and ABN who are also a shareholder in TOM have tested the software of TOM themselves do you? I bought some AAPL shares the other day. Do you think I can influence the functionality of the iPhone 7?
some of DEGIRO’s cheaper execution rates only apply if the customer lifts the offer / sells at the bid. In a way that is the same as funneling DEGIRO’s customer flow to HIQ-Invest or HIQ-Invest paying for order flow if you will.
Flash Boys devotes a couple of chapters on the practice of paying for customer flow and how it feeds the predators (HFT). Maybe Gijs wants to read those chapters.
all this SOR does is to give the impression of better execution not actually improve the execution, unless there is comparable volumes going on at different venues, sending orders to a much lower volume venue is gigantic waste of time and more critically a huge distraction from finding the other side of transaction
also, can people stop posting as ‘reply’ to particular comments, it’s impossible to know within the whole chain of comments where a person is butting in, jack man, can you now recognize the problem of having ‘reply’ to particular comments, it’s nice in theory, doesn’t work in practice, just like the stupid SOR
Why do I hear Degiro not about the missed opportunities by not using a SOR? SOR is working fine in 99% of the cases. Most retail orders are well executed in one trade and not spread over different markets. Best Execution is not guarantied for ALL orders but for most orders I expect.
Strange that Binck is not responding to the valid question, if Thegiro is right, then the HFT machines are frontrunning in miliseconds and the should be punished by the AFM. Leaves another question, why is Thegiro doing this research, and not the AFM ? where the sleeping?
“But truthfully, ANY intermediary who has ever routed an order to TOM could and should then be charged with neglecting the client’s best interests”
The same argument can be made for not using a smart order router. What you should look at is not whether the SOR has a 100% success rate in getting the best price, but whether it performs better than the alternative, which is routing everything to Euronext.
Well, Binck could admit something like that. But they refuse to discuss the topic.
Threatening with legal action is always -1
You can’t blame HFT for taking advantage of an opportunity.
Maybe you even can’t blame binck or TOM for delays at Euronext.
You CAN blame Binck for their reluctance to admit what’s going on.
is front running in milliseconds punishable by the afm?
degiro is doing the research as it’s likely to gain as a result of it, afm doesn’t have direct monetary benefit, this is usually the case where the regulators are the last to find out of a problem, efficacy of the regulator is directly related to the efficacy of the govt itself as an entity, be realistic
congratulations for the new layout
You cannot seriously expect Binck to answer a silly question about the (alleged) inner workings of another company’s software (TOM). It is utterly naive to think otherwise. If you want to know about the software inside of your iPhone that your girlfriend gifted you, do you go and ask her or do go straight to the manufacturer? And by the way, what the f is a “photo of the market” that Gijs also wants from Binck?
As for not answering customer questions or not in a timely fashion, it wasn’t too long ago that Trader Jack was complaining about De Giro’s incompetence in this respect. Double standards?
http://www.amsterdamtrader.com/2014/10/9-things-i-hate-about-degiro.html
what’s so great about the new layout that you are offering congrats, or are you being sarcastic?
it’s painful format as people are replying in between the thread and you end reading new comments spread all over the page rather than queued up at bottom of page
Binck doesn’t need to answer a silly question about the (alleged) inner workings of another company’s software (TOM), they just need to be transparent of what’s going on to the extent it’s visible to them, so many people have repeated this already, duh?
euro’s? nice
it should be rubble, just like this blog, completely useless
Misschien kunnen Gijs en Niels in de tussentijd zelf wat vragen beantwoorden. Ze lezen immers mee.
ABN AMRO biedt retail-broker diensten aan, net als Binck.
ABN AMRO is aandeelhouder van TOM, net als Binck.
ABN AMRO kiest ervoor om (bepaalde) orders aan de TOM Smart Order Router mee te geven ipv die direct naar (bv.) Euronext te routeren, net als Binck. ABM AMRO betoogt op haar website dat zodoende de beste prijs voor de klant wordt bewerkstelligd.
Het ligt zodoende voor de hand, dat als DeGiro haar experimenten had uitgevoerd via ABN AMRO i.p.v. Binck, dezelfde uitkomst zou zijn bereikt als via Binck. Het beweerdelijke “probleem” dat door DeGiro zou zijn waargenomen ligt immers besloten in de Smart Order Router van TOM en niet zozeer in de (keuze van) broker die de order aanlevert aan TOM en haar SOR.
Tot dusver beperkt DeGiro zich in haar kritiek ten aanzien van brokers die TOM’s SOR gebruiken uitsluitend tot Binck. DeGiro zegt op te komen voor particuliere beleggers die mogelijk nadeel zouden ondervinden van het gebruik van TOM’s SOR. Dat is heel nobel.
Beste Gijs en Niels, de particuliere beleggers van Nederland hebben recht op, nee EISEN in het kader van de door jullie geroemde transparantie antwoord op de volgende vraag:
Wanneer kunnen wij eenzelfde onderzoek alsmede publicatie van de uitkomsten verwachten van DeGiro ten aanzien van ABN AMRO als broker?
Een hele simpele vraag, een simpel antwoord.
Beleggend Nederland rekent erop dat jullie in even krachtige bewoordingen elke andere broker door het slijk zullen halen die niet waarmaakt wat hij (volgens jullie) zegt te beloven.
Bij voorbaat dank voor jullie spoedige antwoord.
Maar waarom zeg je niet dat in 99% van de gevallen een SOR prima werkt? Alleen met jullie getrukte opzet niet? Gelukkig slaan jullie jezelf niet op de borst, dus dat is wel fijn.
Conclusie 1: DeGiro erkent dat de SOR van TOM naar behoren werkt (mogelijk) tenzij er grote orders worden verstuurd in illiquide aandelen. Nu is dat laatste sowieso vragen om moeilijkheden zeker met de ietwat getructe orderboeken uit de tests van DeGiro.
Conclusie 2: DeGiro erkent dat voor grote orders een vorm van SOR nodig is, terwijl volgens hun eigen rapport zij hun order (alleen) op Euronext willen vullen. Met andere woorden: een klant die – volgens DeGiro – SOR nodig heeft bij het uitvoeren van een grote order, wordt door DeGiro in de steek gelaten juist wanneer hij het nodig heeft. “Best execution” anno 2014??
Conclusie 3: DeGiro erkent dat het probleem niet zozeer bij Binck ligt alswel bij de SOR van TOM. Binck wordt uitgezonderd in haar berichtgeving omtrent dit “probleem” omdat zij wordt ervaren als de grootste concurrent van DeGiro. Alle andere brokers die van TOM gebruik maken – waaronder hun eigen zakenrelatie ABN AMRO – vallen of staan bij de kwaliteit van de SOR van TOM, maar blijven buiten schot.
Conclusie 4: Gijs ontwijkt een antwoord op de vraag wanneer hij ABN AMRO aan de schandpaal gaat “nagelen” (pun intended). Dat gaat dus niet gebeuren. Hoe spijtig dat ook is voor particuliere beleggers die nu (kennelijk) enorm gevaar lopen als zij (blijven) handelen via ABN.
Sensatiezucht van het ergste soort en slijmerig doen alsof het je om de belangen van beleggers gaat met lulverhalen over transparantie. Geef me ff een teiltje. Ga de volgende keer uit van je eigen kracht, Gijs, in plaats van de concurrent af te zeiken. Het zou heel makkelijk zijn geweest voor Binck een waslijst met grieven over jullie dienstverlening te openbaren a la het artikel hier op AT (“9 things I hate about DeGiro”). Zij staan en stonden daarboven. Het doet me overigens deugd dat deze hele discussie nergens maar dan ook NERGENS meer leeft behalve op dit blog.
Trouwens, als dit de zwakste plek is van Binck, dan ben ik daar kennelijk in goede handen! Ik kan tenminste een normale cash rekening aanhouden bij Binck terwijl DeGiro in dat opzicht nog in het stenen tijdperk leeft.
wel stoer dat je reaguurt Gijs! zeg, laatst schreef hier iemand dat jullie je eigen hedgefund omzet zouden meetellen bij jullie marktaandeel tov binck. klopt dat?
Fake comments have been removed.
what’s with the censorship?
why are people here getting so personal, it’s just work, chill out and go have a heineken
Als TOM het probleem wat Gijs zo nobel voor beleggers heeft blootgelegd op kan lossen wordt de Giro dan klant van TOM?
Here’s the translation for the non-dutch speakers
‘TOM If the problem what so noble Gijs has uncovered for investors can solve the Giro than customer TOM?’
So you mean that if Euronext can speed up with TOM, Degiro can connect to TOM?
degiro is competing with binck and not with tom?
I used to be client of Alex, which is part of Binck and using TOM. Always thought order executions were wrong. Bad luck can happen, but not too often.
Also in stocks with lower tick size (like Imtech), never had executions as expected.
so you left them for a better broker right, problem solved, next
Perhaps Binck should get Joop in to
Help?
what help, they just put up their hand that they are reviewing service levels with TOM and then get on with that, you don’t need to pay up a mio to joop or fancy consultant for that bit of common sense?
These morons at source capital are again giving shit bonuses this year, how is it at other companies? Please share your employer bonus situation (I am especially interested in bonuses for developers).
TBricks merges with Orc
How many times this needs to be repeated, bonus is a carrot for the wage salves, make a judgement based on company performance and your base salary, don’t try to bring bonus into your calculations
wow, two small service providers in a dying industry are merging, that’s fresh out of the box thinking
Apple and Next Step were both dying in mid 90s before the merger.
Yeah, Steve jobs and his idevices are the final puzzle before Orc becomes the first trillion dollar company
euro qe, this meeting or the next?
Nothing new to report in almost a month. This blog is dead.
jaap and joop have been busy playing Sinterklaas and Zwarte Piet, give them a break
[…] and Binck, with respect to the not-so-smart order router from TOM. See DeGiro trashes TOM and Flash Boy Binck ignores law of holes. Few months later TOM decided to shut down their stock trading venue. Assumed that would be the end […]